Friday, 28 November 2014

Between the discovery that the
Cosmopolitan Stock Brokerage Company was ready to beat me by foul means
if the killing handicap of a three-point margin and a point-and-a-half
premium didn't do it, and hints that they didn't want my business
anyhow, I soon made up my mind to go to New York, where I could trade in
the office of some member of the New York Stock Exchange. I didn't want
any Boston branch, where the quotations had to be telegraphed. I wanted
to be close to the original source. I came to New York at the age of
21, bringing with me all I had, twenty-five hundred dollars.

.

I told you I had ten thousand
dollars when I was twenty, and my margin on that Sugar deal was over ten
thousand. But I didn't always win. My plan of trading was sound enough
and won oftener than it lost. If I had stuck to it I'd have been right
perhaps as often as seven out of ten times. In fact, I always made money
when I was sure I was right before I began. What beat me was not having
brains enough to stick to my own game—that is, to play the market only
when I was satisfied that precedents favored my play.

.

There is a time for all things,
but I didn't know it. And that is precisely what beats so many men in
Wall Street who are very far from being in the main sucker class. There
is the plain fool, who does the wrong thing at all times everywhere, but
there is the Wall Street fool, who thinks he must trade all the time.
No man can always have adequate reasons for buying or selling stocks
daily—or sufficient knowledge to make his play an intelligent play.

.

I proved it Whenever I read the
tape by the light of experience I made money, but when I made a plain
fool play I had to lose. I was no exception, was I? There was the huge
quotation board staring me in the face, and the ticker going on, and
people trading and watching their tickets turn" into cash or into waste
paper. Of course I let the craving for excitement get the better of my
judgment. In a bucket shop where your margin is a shoestring you don't
play for long pulls. You are wiped too easily and quickly. The desire
for constant action irrespective of underlying conditions is responsible
for many losses in Wall Street even among the professionals, who feel
that they must take home some money every day, as though they were
working for regular wages. I was only a kid, remember. I did not know
then what I learned later, what made me fifteen years later, wait two
long weeks and see a stock on which I was very bullish go up thirty
points before I felt that it was safe to buy it. I was broke and was
trying to get back, and I couldn't afford to play recklessly. I had to
be right, and so I waited. That was in 1915. It's a long story. I'll
tell it later in its proper place. Now let's go on from where after
years of practice at beating them I let the bucket shops take away most
of my winnings.

.

And with my eyes wide open, to
boot! And it wasn't the only period of my life when I did it, either. A
stock operator has to fight a lot of expensive enemies within himself.
Anyhow, I came to New York with twenty-five hundred dollars. There were
no bucket shops here that a fellow could trust. The Stock Exchange and
the police between them had succeeded in closing them up pretty tight.
Besides, I wanted to find a place where the only limit to my trading
would be the size of my stake. I didn't have much of one, but I didn't
expect it to stay little forever. The main thing at the start was to
find a place where I wouldn't have to worry about getting a square deal.
So I went to a New York Stock Exchange house that had a branch at home
where I knew some of the clerks. They have long since gone out of
business. I wasn't there long, didn't like one of the partners, and then
I went to A. R. Fullerton & Co. Somebody must have told them about
my early experiences, because it was not long before they all got to
calling me the Boy Trader. I've always looked young. It was a handicap
in some ways but it compelled me to fight for my own because so many
tried to take advantage of my youth. The chaps at the bucket shops
seeing what a kid I was, always thought I was a fool for luck and that
that was the only reason why I beat them so often.

.

Well, it wasn't six months
before I was broke. I was a pretty active trader and had a sort of
reputation as a winner. I guess my commissions amounted to something. I
ran up my account quite a little, but, of course, in the end I lost. I
played carefully; but I had to lose. I'll tell you the reason: it was my
remarkable success in the bucket shops!

.

I could beat the game my way
only in a bucket shop; where I was betting on fluctuations. My tape
reading had to do with that exclusively. When I bought the price was
there on the quotation board, right in front of me. Even before I bought
I knew exactly the price I'd have to pay for my stock. And I always
could sell on the instant. I could scalp successfully, because I could
move like lightning. I could follow up my luck or cut my loss in a
second. Sometimes, for instance, I was certain a stock would move at
least a point. Well, I didn't have to hog it, I could put up a point
margin and double my money in a jiffy; or I'd take half a point. On one
or two hundred shares a day, that wouldn't be bad at the end of the
month, what?

.

The practical trouble with that
arrangement, of course, was that even if the bucket shop had the
resources to stand a big steady loss, they wouldn't do it. They wouldn't
have a customer around the place who had the bad taste to win all the
time.

.

At all events, what was a perfect system for trading in bucket shops didn't work in Fullerton's office.

There I was actually buying and
selling stocks. The price of Sugar on the tape might be 105 and I could
see a three-point drop coming. As a matter of fact, at the very moment
the ticker was printing 105 on the tape the real price on the floor of
the Exchange might be 104 or 103. By the time my order to sell a
thousand shares got to Fullerton's floor man to execute, the price might
be still lower. I couldn't tell at what price I had put out my thousand
shares until I got a report from the clerk. When I surely would have
made three thousand on the same transaction in a bucket shop I might not
make a cent in a Stock Exchange house. Of course, I have taken an
extreme case, but the fact remains that in A. R. Fullerton's office the
tape always talked ancient history to me, as far as my system of trading
went, and I didn't realise it.

.

And then, too, if my order was
fairly big my own sale would tend further to depress the price. In the
bucket shop I didn't have to figure on the effect of my own trading. I
lost in New York because the game was altogether different. It was not
that I now was playing it legitimately that made me lose, but that I was
playing it ignorantly. I have been told that I am a good reader of the
tape. But reading the tape like an expert did not save me. I might have
made out a great deal better if I had been on the floor myself, a room
trader. In a particular crowd perhaps I might have adapted my system to
the conditions immediately before me. But, of course, if I had got to
operating on such a scale as I do now, for instance, the system would
have equally failed me, on account of the effect of my own trading on
prices.

.

In short, I did not know the
game of stock speculation. I knew a part of it, a rather important part,
which has been very valuable to me at all times. But if with all I had I
still lost, what chance does the green outsider have of winning, or,
rather, of cashing in?

.

It didn't take me long to
realise that there was something wrong with my play, but I couldn't spot
the exact trouble. There were times when my system worked beautifully,
and then, all of a sudden, nothing but one swat after another. I was
only twenty-two, remember; not that I was so stuck on myself that I
didn't want to know just where I was at fault, but that at that age
nobody knows much of anything.

.

The people in the office were
very nice to me. I couldn't plunge as I wanted to because of their
margin requirements, but old A. R. Fullerton and the rest of the firm
were so kind to me that after six months of active trading I not only
lost all I had brought and all that I had made there but I even owed the
firm a few hundreds.

.

There I was, a mere kid, who had
never before been away from home, flat broke; but I knew there wasn't
anything wrong with me; only with my play. I don't know whether I make
myself plain, but I never lose my temper over the stock market. I never
argue with the tape. Getting sore at the market doesn't get you
anywhere.

.

I was so anxious to resume
trading that I didn't lose a minute, but went to old man Fullerton and
said to him, "Say, A. R., lend me five hundred dollars."

.

"What for?" says he. "I've got to have some money."

.

"What for?" he says again. "For margin, of course," I said.

.

"Five hundred dollars?" he said,
and frowned. "You know they'd expect you to keep up a 10 per cent
margin, and that means one thousand dollars on one hundred shares. Much
better to give you a credit"

"No," I said, "I don't want a
credit here. I already owe the firm something. What I want is for you to
lend me five hundred dollars so I can go out and get a roll and come
back."

.

"How are you going to do it?" asked old A. R. "I'll go and trade in a bucket shop," I told him. "Trade here," he said.

.

"No," I said. "I'm not sure yet I
can beat the game in this office, but I am sure I can take money out of
the bucket shops. I know that game. I have a notion that I know just
where I went wrong here."

.

He let me have it, and I went out of that office where the Boy Terror of the Bucket Shops, as they called him, had lost his pile. I
couldn't go back home because the shops there would not take my
business. New York was out of the question; there weren't any doing
business at that time. They tell me that in the go's Broad Street and
New Street were full of them. But there weren't any when I needed them
in my business.

.

So after some thinking I decided
to go to St. Louis. I had heard of two concerns there that did an
enormous business all through the Middle West. Their profits must have
been huge. They had branch offices in dozens of towns. In fact I had
been told that there were no concerns in the East to compare with them
for volume of business. They ran openly and the best people traded there
without any qualms. A fellow even told me that the owner of one of the
concerns was a vice-president of the Chamber of Commerce but that
couldn't have been in St. Louis. At any rate, that is where I went with
my five hundred dollars to bring back a
stake to use as margin in the office of A. R. Fullerton & Co.,
members of the New York Stock Exchange.

.

When I got to St. Louis I went
to the hotel, washed up and went out to find the bucket shops. One was
the J. G. Dolan Company, and the other was H. S. Teller & Co. I knew
I could beat them. I was going to play dead safe—carefully and
conservatively. My one fear was that somebody might recognise me and
give me away, because the bucket shops all over the country had heard of
the Boy Trader. They are like gambling houses and get all the gossip of
the profesh. Dolan was nearer than Teller, and I went there first. I
was hoping I might be allowed to do business a few days before they told
me to take my trade somewhere else. I walked in. It was a whopping big
place and there must have been at least a couple of hundred people there
staring at the quotations. I was glad, because in such a crowd I stood a
better chance of being unnoticed. I stood and watched the board and
looked them over carefully until I picked out the stock for my initial
play.

.

I looked around and saw the
order-clerk at the window where you put down your money and get your
ticket. He was looking at me so I walked up to him and asked, "Is this
where you trade in cotton and wheat?"

.

"Yes, sonny," says he.

.

"Can I buy stocks too?"

.

"You can if you have the cash," he said.

.

"Oh, I got that all right, all right," I said like a boasting boy.

.

"You have, have you?" he says with a smile.

.

"How much stock can I buy for one hundred dollars?" I asked, peeved-like.

.

"One hundred; if you got the hundred."

.

"I got the hundred. Yes; and two hundred too!" I told him.

.

"Oh, my!" he said.

.

"Just you buy me two hundred shares," I said sharply.

.

"Two hundred what?" he asked, serious now. It was business.

.

I looked at the board again as if to guess wisely and told him, "Two hundred Omaha."

.

"All right!" he said. He took my money, counted it and wrote out the ticket.

.

"What's your name?" he asked me, and I answered, "Horace Kent."

.

He gave me the ticket and I went
away and sat down among the customers to wait for the roll to grow. I
got quick action and I traded several times that day. On the next day
too. In two days I made twenty-eight hundred dollars, and I was hoping
they'd let me finish the week out. At the rate I was going, that
wouldn't be so bad. Then I'd tackle the other shop, and if I had similar
luck there I'd go back to New York with a wad I could do something
with.

.

On the morning of the third day,
when I went to the window, bashful-like, to buy five hundred B. R. T.
the clerk said to me, "Say, Mr. Kent, the boss wants to see you."

.

I knew the game was up. But I asked him, "What does he want to see me about?"

.

"I don't know."

.

"Where is he?"

.

"In his private office. Go in that way." And he pointed to a door.

.

I went in. Dolan was sitting at his desk. He swung around and said, "Sit down, Livingston."

.

He pointed to a chair. My last hope vanished. I don't know how he discovered who I was; perhaps from the hotel register.

He got up from his swivel chair.
He was a whopping big guy. He said to me, "Just come over here,
Livingston, will yeh?" and he walked to the door. He opened it and then
he pointed to the customers in the big room. "D'yeh see them?" he asked.
"See what?"

.

"Them guys. Take a look at 'em,
kid. There's three hundred of 'em! Three hundred suckers! They feed me
and my family. See? Three hundred suckers! Then yeh come in, and in two
days yeh cop more than I get out of the three hundred in two weeks. That
ain't business, kid—not for me! I ain't got nothin' agin yeh.

.

Yer welcome to what ye've got. But yeh don't get any more. There ain't any here for yeh!"

.

"Why, I…"

.

"That's all. I seen yeh come in
day before yesterday, and I didn't like yer looks. On the level, I
didn't. I spotted yeh for a ringer. I called in that jackass there"—he
pointed to the guilty clerk—"and asked what you'd done; and when he told
me I said to him: 'I don't like that guy's looks. He's a ringer!' And
that piece of cheese says: 'Ringer my eye, boss! His name is Horace
Kent, and he's a rah-rah boy playing at being used to long pants. He's
all right!' Well, I let him have his way. That blankety-blank cost me
twenty-eight hundred dollars. I don't grudge it yeh, my boy. But the
safe is locked for yeh."

"Look here—" I began.

.

"You look here, Livingston," he said.

.

"I've heard all about yeh. I
make my money coppering suckers' bets, and yeh don't belong here. I aim
to be a sport and yer welcome to what yeh pried off'n us. But more of
that would make me a sucker, now that I know who yeh are. So toddle
along, sonny!"

.

I left Dolan's place with my
twenty-eight hundred dollars' profit. Teller's place was in the same
block. I had found out that Teller was a very rich man who also ran up a
lot of pool rooms. I decided to go to his bucket shop. I wondered
whether it would be wise to start moderately and work up to a thousand
shares or to begin with a plunge, on the theory that I might not be able
to trade more than one day. They get wise mighty quick when they're
losing and I did want to buy one thousand B. R. T. I was sure I could
take four or five points out of it. But if they got suspicious or if too
many customers were long of that stock they might not let me trade at
all. I thought perhaps I'd better scatter my trades at first and begin
small.

.

It wasn't as big a place as
Dolan's, but the fixtures were nicer and evidently the crowd was of a
better class. This suited me down to the ground and I decided to buy my
one thousand B. R. T. So I stepped up to the proper window and said to
the clerk, "I'd like to buy some B. R. T. What's the limit?"

.

"There's no limit," said the clerk. "You can buy all you please—if you've got the money."

.

"Buy fifteen hundred shares," I says, and took my roll from my pocket while the clerk starts to write the ticket.

.

Then I saw a red-headed man just
shove that clerk away from the counter. He leaned across and said to
me, 'Say, Livingston, you go back to Dolan's. We don't want your
business."

.

"Wait until I get my ticket," I said. "I just bought a little B. R. T."

.

"You get no ticket here," he said. By this time other clerks had got behind him and were looking at me.

There was no sense in getting
mad or trying to argue, so I went back to the hotel, paid my bill and
took the first train back to New York. It was tough. I wanted to take
back some real money and that Teller wouldn't let me make even one
trade.

.

I got back to New York, paid
Fullerton his five hundred, and started trading again with the St. Louis
money. I had good and bad spells, but I was doing better than breaking
even. After all, I didn't have much to unlearn; only to grasp the one
fact that there was more to the game of stock speculation than I had
considered before I went to Fullerton's office to trade. I was like one
of those puzzle fans, doing the crossword puzzles in the Sunday
supplement. He isn't satisfied until he gets it. Well, I certainly
wanted to find the solution to my puzzle. I thought I was done with
trading in bucket shops. But I was mistaken.

.

About a couple of months after I
got back to New York an old jigger came into Fullerton's office. He
knew A. R. Somebody said they'd once owned a string of race horses
together. It was plain he'd seen better days. I was introduced to old
McDevitt. He was telling the crowd about a bunch of Western race-track
crooks who had just pulled off some skin game out in St. Louis. The head
devil, he said, was a pool-room owner by the name of Teller.

.

"What Teller?" I asked him.

.

"Hi Teller; H. S. Teller."

.

"I know that bird," I said.

.

"He's no good," said McDevitt.

.

"He's worse than that," I said, "and I have a little matter to settle with him."

.

"Meaning how?"

.

"The only way I can hit any of
these short sports is through their pocketbook. I can't touch him in St.
Louis just now, but some day I will." And I told McDevitt my grievance.

.

"Well," says old Mac, "he tried
to connect here in New York and couldn't make it, so he's opened a place
in Hoboken. The word's gone out that there is no limit to the play and
that the house roll has got the Rock of Gibraltar faded to the shadow of
a bantam flea."

.

"What sort of a place?" I thought he meant pool room.

.

"Bucket shop," said McDevitt.

.

"Are you sure it's open?"

.

"Yes; I've seen several fellows who've told me about it."

.

"That's only hearsay," I said. "Can you find out positively if it's running, and also how heavy they'll really let a man trade?"

He did. It seems Teller was
already doing a big business and would take all he could get. This was
on a Friday. The market had been going up all that week this was twenty
years ago, remember—and it was a cinch the bank statement on Saturday
would show a big decrease in the surplus reserve. That would give the
conventional excuse to the big room traders to jump on the market and
try to shake out some of the weak commission-house accounts. There would
be the usual reactions in the last half hour of the trading,
particularly in stocks in which the public had been the most active.
Those, of course, also would be the very stocks that Teller's customers
would be most heavily long of, and the shop might be glad to see some
short selling in them. There is nothing so nice as catching the suckers
both ways; and nothing so easy—with one-point margins.

.

That Saturday morning I chased
over to Hoboken to the Teller place. They had fitted up a big customers'
room with a dandy quotation board and a full force of clerks and a
special policeman in gray. There were about twenty-five customers.

.

I got talking to the manager. He
asked me what he could do for me and I told him nothing; that a fellow
could make much more money at the track on account of the odds and the
freedom to bet your whole roll and stand to win thousands in minutes
instead of piking for chicken feed in stocks and having to wait days,
perhaps. He began to tell me how much safer the stock-market game was,
and how much some of their customers made—you'd have sworn it was a
regular broker who actually bought and sold your stocks on the
Exchange—and how if a man only traded heavy he could make enough to
satisfy anybody.

.

He must have thought I was
headed for some pool room and he wanted a whack at my roll before the
ponies nibbled it away, for he said I ought to hurry up as the market
closed at twelve o'clock on Saturdays. That would leave me free to
devote the entire afternoon to other pursuits. I might have a bigger
roll to carry to the track with toe—if I picked the right stocks.

.

I looked as if I didn't believe
him, and he kept on buzzing me. I was watching the clock. At n 115 I
said, "All right," and I began to give him selling orders in various
stocks. I put up two thousand dollars in cash, and he was very glad to
get it. He told me he thought I'd make a lot of money and hoped I'd come
in often.

.

It happened just as I figured.
The traders hammered the stocks in which they figured they would uncover
the most stops, and, sure enough, prices slid off. I closed out my
trades just before the rally of the last five minutes on the usual
traders' covering.

.

There was fifty-one hundred dollars coming to me. I went to cash in.

.

"I am glad I dropped in," I said to the manager, and gave him my tickets.

.

"Say," he says to me, "I can't
give you all of it. I wasn't looking for such a run. I'll have it here
for you Monday morning, sure as blazes."

.

"All right. But first I'll take all you have in the house," I said.

.

"You've got to let me pay off
the little fellows," he said. "I'll give you back what you put up, and
anything that's left. Wait till I cash the other tickets." So I waited
while he paid off the other winners. Oh, I knew my money was safe.
Teller wouldn't welsh with the office doing such a good business. And if
he did, what else could I do better than
to take all he had then and there? I got my own two thousand dollars
and about eight hundred dollars besides, which was all he had in the
office. I told him I'd be there Monday morning. He swore the money would
be waiting for me.

.

I got to Hoboken a little before
twelve on Monday. I saw a fellow talking to the manager that I had seen
in the St. Louis office the day Teller told me to go back to Dolan. I
knew at once that the manager had telegraphed to the home office and
they'd sent up one of their men to investigate the story. Crooks don't
trust anybody.

.

"I came for the balance of my money," I said to the manager.

.

"Is this the man?" asked the St. Louis chap.

.

"Yes," said the manager, and took a bunch of yellow backs from his pocket.

.

"Hold on!" said the St. Louis
fellow to him and then turns to me, "Say, Livingston, didn't we tell you
we didn't want your business?"

.

"Give me my money first," I said to the manager, and he forked over two thousands, four five-hundreds and three hundreds.

.

"What did you say?" I said to St. Louis.

.

"We told you we didn't want you to trade in our place."

.

"Yes," I said; "that's why I came."

.

"Well, don't come any more. Keep
away!" he snarled at me. The private policeman in gray came over,
casual-like. St. Louis shook his fist at the manager and yelled: "You
ought to've known better, you poor boob, than to let this guy get into
you. He's Livingston. You had your orders."

.

"Listen, you," I said to the St.
Louis man. "This isn't St. Louis. You can't pull off any trick here,
like your boss did with Belfast Boy."

.

"You keep away from this office! You can't trade here!" he yells.

.

"If I can't trade here nobody else is going to," I told him. "You can't get away with that sort of stuff here."

.

Well, St. Louis changed his tune at once.

.

"Look here, old boy," he said,
all fussed up, "do us a favor. Be reasonable! You know we can't stand
this every day. The old man's going to hit the ceiling when he hears who
it was. Have a heart, Livingston!"

.

"I'll go easy," I promised.

.

"Listen to reason, won't you? For the love of Pete, keep away! Give us a chance to get a good start. We're new here. Will you?"

.

"I don't want any of this
high-and-mighty business the next time I come," I said, and left him
talking to the manager at the rate of a million a minute. I'd got some
money out of them for the way they treated me in St. Louis. There wasn't
any sense in my getting hot or trying to close them up. I went back to
Fullerton's office and told McDevitt what had happened. Then I told him
that if it was agreeable to him I'd like to have him go to Teller's
place and begin trading in twenty or thirty share lots, to get them used
to him. Then, the moment I saw a good chance to clean up big, I'd
telephone him and he could plunge.

.

I gave McDevitt a thousand
dollars and he went to Hoboken and did as I told him. He got to be one
of the regulars. Then one day when I thought I saw a break impending I
slipped Mac the word and he sold all they'd let him. I cleared
twenty-eight hundred dollars that day, after giving Mac his rake-off and
paying expenses, and I suspect Mac put down a little bet of his own
besides. Less than a month after that, Teller closed his Hoboken branch.
The police got busy. And, anyhow, it didn't pay, though I only traded
there twice. We ran into a crazy bull market when stocks didn't react
enough to wipe out even the one-point margins, and, of course, all the
customers were bulls and winning and pyramiding. No end of bucket shops
busted all over the country.

.

Their game has changed. Trading
in the old-fashioned bucket shop had some decided advantages over
speculating in a reputable broker's office. For one thing, the automatic
closing out of your trade when the margin reached the exhaustion point
was the best kind of stop-loss order. You couldn't get stung for more
than you had put up, and there was no danger of rotten execution of
orders, and so on. In New York the shops never were as liberal with
their patrons as I've heard they were in the West. Here they used to
limit the possible profit on certain stocks of the football order to two
points. Sugar and Tennessee Coal and Iron were among these. No matter
if they moved ten points in ten minutes you could only make two on one
ticket. They figured that otherwise the customer was getting too big
odds; he stood to lose one dollar and to make ten. And then there were
times when all the shops, including the biggest, refused to take orders
on certain stocks. In 1900, on the day before Election Day, when it was a
foregone conclusion that McKinley would win, not a shop in the land let
its customers buy stocks. The election odds were 3 to i on McKinley. By
buying stocks on Monday you stood to make from three to six points or
more. A man could bet on Bryan and buy stocks and make sure money. The
bucket shops refused orders that day.

.

If it hadn't been for their
refusing to take my business I never would have stopped trading in them.
And then I never would have learned that there was much more to the
game of stock speculation than to play for fluctuations of a few points.
.